Fees payable to the Secretary of State of Illinois to create an LLC, and the filing fees in connection with annual report are among the highest in the United States. Filing Articles of Organization in Illinois costs $500. Filing on-line or with an expedited request adds another $100. Creating a Series LLC under Illinois law requires the payment of a $750 fee, plus $50 for each series. The filing fee for an annual report is $250 (and Series LLCs must add $50 for each series to the annual filing fee). Creating an LLC in some other states costs far less, and annual reporting fees are also lower. As an example, Colorado's filing fee is $50, and its annual fee is $10.
Forming an LLC Elsewhere Often Doesn't Help
Forming an LLC in another state often is no help, if the actual business is going to be transacted in Illinois. This is because Illinois requires the out-of-state LLC to register here before beginning business. The initial filing fee is the same as forming here, $500. The filing fee for the annual report of a "foreign" LLC is still $250. Thus many businesses formed elsewhere pay the fees to their state of formation, PLUS the same Illinois fees they would have paid if they formed here.
Some States Have Attempted to Give a Sort of Quantity Discount for "Series" LLCs
Illinois and a few other states has adopted a "Series LLC" provision, allowing one LLC to have several internal cells or series, which are separate from each other for liability purposes. Other states with Series provisions are Delaware, Iowa, Nevada, Oklahoma, Tennessee, and Utah. Minnesota, North Dakota & Wisconsin have some series features as well. There are, however, serious concerns about whether the separateness for liability purposes will be respected by the courts, including bankruptcy courts.
Holding Companies Enjoy an Exemption from Filing Requirements in Many States
Although Illinois requires foreign LLCs to register if they do business here, its LLC act contains a provision listing some activities which do not constitute "doing business" for purposes of requiring registration. Among these activities are "owing, without more, real or personal property. (805 ILCS 180/45-47(7) ) Thus a foreign LLC formed solely for the purpose of holding real estate, without other activities, would not have to register in Illinois. Our Secretary of State has indicated that the mere receipt of rental income is "without more." Other states having similar provision in their LLC acts include Indiana, Michigan, Mississippi, Nevada, and Wisconsin. I am sure there are others as well.
Cost Savings are Substantial
Thus an LLC formed in Colorado, or some other state which controls costs, offers a substantial saving over an Illinois domestic, if the company is formed as a holding company for real estate. Initial State fee of $50 vs. $500. Annual fee of $10 vs $250. The one offsetting cost is the fee for a registered agent in the foreign state. If you have a friend or can find someone offering a low-cost registered agent fee in the foreign jurisdiction, you can take full advantage of this cost saving technique.
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